Holiday Spirit Relieves QE Fatigue

Written by: Richard Suttmeier11/23/12 - 7:26 AM EST

NEW YORK ( TheStreet) -- A week ago market sentiment turned on a dime when congressional leaders announced that they were optimistic of finding a compromise solution that prevents the economy from falling off the fiscal cliff. I for one was quick to recognize the changed environment for U.S. equities even though I remain bearish longer term.

Some key levels were penetrated to the upside on Monday setting the stage for the Thanksgiving week rally, which is building a base for a potential Santa Claus rally even with continued negative weekly chart profiles for the major equity averages. Some of the weekly chart profiles could shift to neutral as Santa and his sleigh prepare to leave the North Pole a month from now.

On Monday, I wrote, Stocks Set to Bungee from Fiscal Cliff where I described the potential key reversal for the Russell 2000, which was confirmed at Wednesday's close. I also tracked the upward trend for the S&P 500 above my annual pivot at 1363.2.

On Tuesday, I wrote, Since QE3, Treasuries Outperformed Stocks and Commodities and explained that it could be time to shift from a "risk off" investment strategy to a "risk on" "buy and trade." I showed how U.S. Treasuries should be a component of a long-term investment Strategy if you do not intend to "buy and hold."

Analysis and Key Levels for the U.S. Capital Markets

Yield on the 10-Year Treasury Note (1.685%): The weekly chart is on the cusp of favoring either a "risk off" long or a "risk on" buy as the yield rests on top of its five-week modified moving average at 1.671%. The most likely trade is between my semiannual value level at 1.853% and my monthly risky level at 1.452%.

Nymex Crude Oil ($87.63): The weekly chart for crude oil stays negative on a close Friday below the five-week MMA at $88.58. The 200-week simple moving average is a major support at $83.32 with my monthly value level at $76.96, and my annual and quarterly risky levels are $103.58 and $107.31.

Euro vs. the Dollar (1.2822): The weekly chart shifts to neutral from negative on a close Friday above the five-week MMA at 1.2812. My monthly value level lags at 1.2289 with semiannual and quarterly risky levels at 1.2917 and 1.3048.

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